The advance of disruptive or emerging technologies — such as artificial intelligence, with big names like Google and Microsoft committing large-scale investments to its development — and the way it is changing typical business models have put digitization initiatives front and center at the C-suites’ priority list in recent years.
However, C-suite leaders including CFOs consistently overestimate the capacity of their IT teams, a recent report by enterprise software firm Planview found, with business leaders believing their IT teams can deliver 10 times more than their actual capacity.
When it comes time for senior management teams to decide on “what to invest in and what not to invest in, they’re overloading the technology teams at 2x of the actual workload that they actually can handle,” said Razat Gaurav, CEO of enterprise software provider Planview.
As the executive leader responsible for defining and deciding how the business will allocate capital alongside the CEO, CFOs therefore play a critical role when shaping their companies’ digitization efforts, Gaurav said.
Shaping digitization spending
Trimming bloated technology budgets has been on CFOs’ minds since the middle of last year, when new economic pressures forced many companies to reexamine their digitization initiatives’ return on investment with a closer eye. Finance chiefs are becoming more reticent to fork over funds to business leaders unless they are expressing a more dire need, leaders told CFO Dive in a January report.
Figuring out where to spend and where to cut back makes a CFOs’ perspective in a businesses’ digitization strategy crucial, especially as overwhelmed and overloaded IT teams struggle to deliver — of the projects planned by such teams, only 8% are actually delivered, according to the Planview survey.
Taking a data-driven approach here can help to pare down unnecessary spending; at the majority of organizations, “every team is shouting the loudest, and whoever shouts loudest gets their projects funded,” Gaurav said. “Very few companies actually have a data driven approach to really understanding how to prioritize these digitalization efforts.”
Finance chiefs are able to be very impartial and to provide this clarity of view, he said.
“Somebody's got to come in and look at this in a very objective way across those sometimes conflicting priorities” and to help process how capital allocation decisions can be made in a data-driven way, Gaurav said.
Setting the digitization roadmap
Making the shift from a “project” to a “product” management model is essential for companies to advance their digitization efforts, according to the Planview report.
Indeed, starting with a designated end goal for one’s technology need is key for such projects to succeed, Gartner analyst Nisha Bhandare previously told CFO Dive. According to a recent Gartner report, 92% of CFOs are planning to up their technology spending — but only 30% of technology projects investments by finance teams succeed.
CFOs can bring discipline to organizations as they determine what business outcome they are trying to achieve when it comes to tangible technology investment, Gaurav said.
“The CFO doesn’t need to come up with the answer. The CFO needs to ask that business leader, ‘Quantify for me, what is the business value for the organization,’” he said. If the business leader cannot answer then the CFO, responsible for driving accountability around technology ROI, should question if they should be funded, he said.
Planview’s report surveyed 326 individuals from 253 unique companies, with data collected between April to December of 2022.